Fintech startups should be sidling up to industry giants, says a pair of executives from PayPal and Mastercard. CNBC reports that these leaders recommended that newcomers in financial services welcome bank partnerships as a strategic move to “create new user experiences and solidify customers’ trust.”
Bill Ready, PayPal’s chief operating officer, decried a winner-take-all mindset that hinders innovation to CNBC’s Elizabeth Schulze at the World Economic Forum in Davos, Switzerland. He told Schulze that the notion that banking giants “have to lose” for fintech entrepreneurs to win is a “completely false premise.”
He compared the relationship between fintech firms and established banks to that of smartphone makers and cellular networks, describing the potential for a reciprocally-beneficial relationship.
“I think partnering with those banks is a huge opportunity to move much more quickly in a way that lifts the entire ecosystem versus saying it has to be a zero sum game.”
“I think partnering with those banks is a huge opportunity to move much more quickly in a way that lifts the entire ecosystem versus saying it has to be a zero sum game,” Ready said. “There’s a much greater objective here than saying let’s split the pie that exists today. There’s a much broader opportunity in the future that we can work together to go create.”
While tech-bank partnerships are not common, they are slowly emerging in the industry.
Mastercard Vice Chairman Ann Cairns touted the recent partnership between Apple Pay and the payments giant as a success for both parties.
“People use (Apple Pay) to go through the London Underground every day and just tap your phone and then it creates a virtuous circle where people are buying coffee and the whole world starts to move contactless,” she told CNBC.
“Everyone’s trying to provide fantastic user experiences by joining up and partnering and really sharing each other’s technology to create the best-end result,” she explained. “And actually it’s about creating something that’s seamless and easy that people can trust.”
While digital banks have enjoyed impressive growth in Europe and Latin America, consumer trust is still a roadblock for user acquisition.
“Who do you ultimately want to leave your money with?” Cairns observed, insisting that consumers still harbor a preferences for established lenders versus neo-banks. “That’s the big question, regardless of how you move it around.”